With the water companies sector to grow by 4-5% per year on average in real terms up to 2020, investments in water infrastructure are seen as good long-term investments, according to Bank Sarasin’s Sustainable Research report.
“Sustainably managed investments in the water infrastructure whether over a horizon of five or 50 years present huge growth opportunities,” the report said.
Global water demand is growing faster than the world’s population. Unlike other materials such as oil or gold, however, water is not a tradable commodity. Water purification and supply, along with wastewater treatment, are therefore much more interesting themes for the sustainable investor.
Bank Sarasin’s Sustainable Research team has compiled a universe of companies that make a sustainable contribution to the supply of water and treatment of wastewater. In the last five years the sustainable water universe has easily beaten the global equity market.
The largest segment of the water industry in terms of sales is that of “utilities”, which are predominantly owned by the public sector, however. Consequently the spotlight falls mainly on suppliers, since the utilities invest almost half their revenues in components (pumps, pipes, etc.) and construction works. Companies offering products that save water, or manage water more efficiently in their production processes, will also benefit in view of water scarcity.
Since investment in the renovation of the water infrastructure has been neglected for decades, there is now a growing need to renovate networks in the more advanced economies. It is vital to prevent the amount of water lost through leaks from rising still further. In emerging economies and newly industrialised nations, the main challenge is the expansion of the water infrastructure. The emphasis here is on ensuring effective wastewater treatment, since the pollution of water courses has reached a dangerous level and is increasingly threatening the provision of fresh drinking water.
As living standards in the newly industrialised countries witnessing change and eating habits are shifting in favour of greater meat consumption. A large amount of arable land is needed to grow fodder for meat production. However, there is a shortage of agricultural land watered by rain, so that expanding agricultural land usually requires artificial irrigation. This trend clearly demonstrates how demand for water is continuously rising. Scarcity drives the need for increasingly expensive water treatment. Global water demand from households, industry and agriculture is increasing by roughly 2% every year and is growing faster than the population.